The official interest rate set by the Reserve Bank of Australia (RBA) currently sits at 0.1%, the lowest rate on record. With the Australian economy already slowing, coronavirus has hit the financial markets for six, and the RBA has had no choice but to react by cutting rates to an all-time low. As a result, borrowing money has never been cheaper, and many mortgage lenders will lend you money for a home at 3% per annum.
However, interest rates in Australia have not always been this low. In the 1980s, the RBA was waging war on inflation, using monetary policy to try and control it. The standard variable home loan interest rates hit an all-time Australian record high of 17% per annum in June 1989. People who struggled to pay their mortgage during those periods of high-interest rates would now think the next generation have it easy.
I am not sure that is the case. House prices are so much higher than in the late 1980s, and wages have not kept up at the same pace. Young couples looking to buy their first home now need to borrow more money to get into their dream home. Though the interest rates are now lower, the proportion of household disposable income towards interest payments has now increased.
With a rise in interest rates inevitable, many people will have high debt levels with higher interest rates. As a result, it will become harder to service the loan, putting financial pressure on many families.
The Great Australian Dream believes that home-ownership can lead to a better life and is an expression of success and security. Unfortunately, achieving that dream is now harder than ever.
However, interest rates in Australia have not always been this low. In the 1980s, the RBA was waging war on inflation, using monetary policy to try and control it. The standard variable home loan interest rates hit an all-time Australian record high of 17% per annum in June 1989. People who struggled to pay their mortgage during those periods of high-interest rates would now think the next generation have it easy.
I am not sure that is the case. House prices are so much higher than in the late 1980s, and wages have not kept up at the same pace. Young couples looking to buy their first home now need to borrow more money to get into their dream home. Though the interest rates are now lower, the proportion of household disposable income towards interest payments has now increased.
With a rise in interest rates inevitable, many people will have high debt levels with higher interest rates. As a result, it will become harder to service the loan, putting financial pressure on many families.
The Great Australian Dream believes that home-ownership can lead to a better life and is an expression of success and security. Unfortunately, achieving that dream is now harder than ever.